Sample Business Contracts


Product License Agreement - Southern Research Institute and DrugAbuse Sciences Inc.


                            PRODUCT LICENSE AGREEMENT


                                     Between

                           SOUTHERN RESEARCH INSTITUTE
                             2000 Ninth Avenue South
                            Birmingham, Alabama 35205

                                       and

                            DRUG ABUSE SCIENCES, INC.
                           1430 O'Brien Drive, Suite E
                          Menlo Park, California 94025


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                                TABLE OF CONTENTS


                                                                                 Page
                                                                                 ----
       
Section 1.  Definitions.............................................................1

Section 2.  License Grants..........................................................4

Section 3.  Running Royalties.......................................................5

Section 4.  Due Diligence in Commercialization......................................6

Section 5.  Product Development and Marketing.......................................6

Section 6.  Naltrexone Patent Protection............................................6

Section 7.  Enforcement of the Naltrexone Patent....................................7

Section 8.  Infringement of Third Party Rights......................................7

Section 9.  Representations and Warranties of Southern..............................8

Section 10.  Negation of Warranties by Southern.....................................9

Section 11.  Representations and Warranties of DAS..................................9

Section 12.  Limitation of Liability................................................9

Section 13.  Indemnity.............................................................10

Section 14.  Confidentiality.......................................................10

Section 15.  Termination...........................................................11

Section 16.  General Provisions....................................................12

Exhibit A


                                            i

<PAGE>

          CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
          AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
          HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


                            PRODUCT LICENSE AGREEMENT

         THIS PRODUCT LICENSE AGREEMENT (the "Agreement") is hereby made and
entered into as of the first day of July, 1999 by and between SOUTHERN RESEARCH
INSTITUTE, an Alabama non-profit corporation, having an office at 2000 Ninth
Avenue South, Birmingham, Alabama 35205 ("Southern") and DRUG ABUSE SCIENCES,
INC., a California corporation, having an office at 1430 O'Brien Drive, Suite
E, Menlo Park, California 94025 ("DAS").

                                    RECITALS

         WHEREAS, DAS is engaged in the business of discovering, developing,
licensing, manufacturing, marketing and selling pharmaceutical products and all
related activities; and

         WHEREAS, in the course of such business, Southern and DAS have
entered into a research agreement dated February 28, 1997, as amended (the
"Research Agreement"), directed toward the development and evaluation of an
[* * *] for use in the treatment of heroin addicts and alcoholics; and

         WHEREAS, Section l(c) of the Research Agreement grants to DAS an
option (the "Option") to acquire from Southern an exclusive license to such
naltrexone formulation upon reasonable terms and conditions; and

         WHEREAS, DAS desires to exercise such Option and to acquire a license
to such naltrexone formulation; and

         WHEREAS, Southern desires to grant to DAS the desired license, subject
to the terms and conditions of this Agreement; and

         WHEREAS, Southern and DAS desire to set forth in writing the terms and
conditions under which DAS will acquire from Southern the desired license to
the naltrexone formulation.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the premises set forth above and
the covenants and promises hereinafter set out, DAS and Southern, intending to
be legally bound, hereby agree as follows:

SECTION 1.     DEFINITIONS.

         SECTION 1.1 "AFFILIATES" - means any corporation, company,
partnership, joint venture or other business entity which controls, is
controlled by, or is under common control with DAS. For purposes of this
Section 1.1, "control" means: (a) in the case of a corporation, the direct or
indirect ownership of at least forty percent (40%) of the stock or
participating shares entitled to vote for the election of directors, or (b) in
all other cases, the direct or indirect ownership of at least a forty percent
(40%) profits interest in the business entity.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


                                       1

<PAGE>

         SECTION 1.2 "AGREEMENT" means this Product License Agreement entered
into by and between DAS and Southern as of July 1, 1999.

         SECTION 1.3 "AVERAGE ANNUAL RUNNING ROYALTY PAYMENT" means an amount
equal to [* * *] percent ([* * *]) of the average of the annual Running
Royalties paid by DAS to Southern in the first three (3) years after the first
commercial sale of Controlled Release Naltrexone in the United States.

         SECTION 1.4 "BASE ROYALTY PAYMENT" means, for each year during the Term
of this Agreement, the following amount:



                                                              Base Royalty
         Applicable Year                                      Payment Due
         ---------------                                      ------------
                                                         
         From the Effective Date until
         the [* * *]                                           [* * *]

         For each year thereafter                              [* * *] Payment


         SECTION 1.5 "CONFIDENTIAL INFORMATION" means any proprietary
information, research project, processes, work in process, future development,
scientific, engineering, manufacturing, marketing, business plan, financial or
personnel matter relating to either DAS or Southern, DAS' present or future
products, sales, supplies, customers, employees, investors or business
including DAS' plans to commercialize Controlled Release Naltrexone and any
other information or biological or chemical materials relating to Controlled
Release Naltrexone, whether in oral, written, graphic or electronic form.

         SECTION 1.6 "CONTROLLED RELEASE NALTREXONE" means [********]

         SECTION 1.7 "EFFECTIVE DATE" means July 1, 1999.

         SECTION 1.8 "FORCE MAJEURE" means with respect to a party, any event
reasonably beyond the control of such party including, but not limited to wars,
hostilities, revolutions, riots, civil commotion, national emergency, strikes,
lockouts, unavailability of supplies, epidemics, fire, flood, earthquake, force
of nature, explosion, embargo, or any other Act of God, or any law,
proclamation, regulation, ordinance, or other act or order of any court,
government or governmental agency.

         SECTION 1.9 "NALTREXONE" means each of [********]

         SECTION 1.10 "NALTREXONE PATENT" means United States Patent
Application Serial No. 60/128,477, filed April 9, l999, and the patent or
patents issued therefrom and includes, without limitation, all substitutions,
divisionals, continuations, continuations-in-part and inventors'

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       2

<PAGE>

certificates and all foreign counterparts of the foregoing patent or patents
together with all registrations, reissues, reexaminations or extensions of such
patent or patents.

         SECTION 1.11 "NET SALES" means the total of all amounts actually
received by DAS or its Affiliates, for sales of Controlled Release Naltrexone
to independent third-parties (including, but not limited to Sublicensees and
distributors) that, except for the licenses granted by Southern to DAS in
Sections 2.1 and 2.1 of this Agreement, would infringe the Naltrexone Patent or
the Southern Patent Rights, less:

                  (a)      returns, allowances, discounts, commissions, and
adjustments;

                  (b)      packing, handling, transportation, and insurance
charges;

                  (c)      sales, use, excise and similar taxes, duties and
similar governmental assessments imposed on the sale of Controlled Release
Naltrexone; and

                  (d)      the amount of any Running Royalties actually paid by
DAS to a third party to acquire rights to a patent which is materially
necessary in DAS' reasonable judgement, consistent with industry practices, to
commercialize, develop or exploit Control Release Naltrexone.

         SECTION 1.12 "RUNNING ROYALTY" means, for each year during the term of
this Agreement, the following amount:



         Net Sales of Controlled
         Release Naltrexone                 Running Royalty
         -----------------------            ---------------
                                      
         [* * *]                            [* * *] of Net Sales

         [* * *]                            [* * *]  of [* * *]
                                            [* * *]

         [* * *]                            [* * *]  plus  [* * *] of
                                            Net Sales [* * *]

         SECTION 1.13 "SOUTHERN KNOW-HOW" means any and all inventions (whether
or not patentable), technical information, know-how, processes, procedures,
compositions, devices, methods, techniques, data, information, or physical,
chemical, or biological materials known to or possessed by Southern which are
either covered by the Southern Patents or are reasonably necessary or useful to
enable DAS to commercialize, develop or exploit Controlled Release Naltrexone.

         SECTION 1.14 "SOUTHERN PATENT RIGHTS" means the rights described in the
patents listed on EXHIBIT A to this Agreement and includes, without limitation,
all substitutions, divisionals, continuations, continuations-in-part and
inventors' certificates and all foreign counterparts of the foregoing patents
together with all registrations, reissues, reexaminations or extensions of such
patents.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       3

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         SECTION 1.15 "SUBLICENSEE" shall mean any non-Affiliate third party to
whom DAS has granted the right to sell Controlled Release Naltrexone.

         SECTION 1.16 "TERM OF THIS AGREEMENT" means a period beginning on the
Effective Date and ending upon the later of: (1) December 31, 2010, or (2) the
expiration of the last to expire of the Naltrexone Patent(s) or Southern Patent
Rights.

         SECTION 1.17 "THIRD ANNIVERSARY DATE" means the date which is three (3)
years from the date of the first commercial sale of Controlled Release
Naltrexone in the United States.

SECTION 2         LICENSE GRANTS.

         SECTION 2.1 EXCLUSIVE LICENSE. Subject to the terms and conditions of
this Agreement, Southern hereby grants to DAS an exclusive, worldwide license
under the Naltrexone Patent to develop, create, make, have made, use, distribute
and have distributed, sell and have sold, and otherwise exploit for any
commercial purpose Controlled Release Naltrexone.

         SECTION 2.2 NON-EXCLUSIVE LICENSE. Subject to the terms and conditions
of this Agreement including, but not limited to the license granted and
restrictions set forth in Section 2.1, Southern hereby grants to DAS a
non-exclusive, world-wide license to practice the Southern Patent Rights and the
Southern Know-How in conjunction with the commercialization, development or
exploitation of Controlled Release Naltrexone.

         SECTION 2.3 RIGHT TO SUBLICENSE. Subject to the terms and conditions
of this Agreement, Southern hereby grants to DAS the right to sublicense the
right to make, have made, use, sell and have sold Controlled Release
Naltrexone. Any such sublicense shall be granted pursuant to the terms and
conditions of this Agreement. The granting of a sublicense under this Agreement
shall not relieve DAS of its responsibilities for performance hereunder. In the
event that DAS grants a sublicense pursuant to the terms of this Agreement, DAS
shall promptly notify Southern of the grant of said sublicense and shall
provide a copy to Southern within thirty (30) days of the date of its
execution, unless DAS obtains Southern's approval to the contrary, which
Southern will not unreasonably withhold.

         SECTION 2.4 LICENSE TO SOUTHERN. Subject to the terms and conditions
of this Agreement, DAS (on behalf of itself and its Affiliates) hereby grants
to Southern a non-exclusive, royalty-free license to fully exploit for any
purpose any improvements to the Southern Patent Rights that are conceived and
reduced to practice by DAS or its Affiliates during the term of this Agreement
and upon which DAS or any of its Affiliates files an application for letters
patent, and including any letters patent that issue therefrom. DAS hereby
agrees to promptly notify Southern of any and all such improvements.
Prosecution of all such improvements shall be governed by the provisions of
Section 6 of this Agreement. DAS and its Affiliates grant such license on an
"AS IS" basis, and hereby disclaim all warranties, whether express or implied,
relating to the subject matter of this Section 2.4.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       4

<PAGE>

SECTION 3.    RUNNING ROYALTIES.

         SECTION 3.1 CALCULATION OF AMOUNT. During each year of the Term of
this Agreement, DAS shall pay to Southern an amount equal to the greater of:
(a) the Running Royalty or (b) the Base Royalty Payment.

         SECTION 3.2 TIMING OF PAYMENTS. Running Royalties shall be paid on a
[* * *]. DAS shall pay interest on any amounts that are not subject to a good
faith dispute between the parties and are not paid to Southern when due under
this Section 3.2 at the rate of [* * *] as set by AmSouth Bank, Birmingham,
Alabama per annum. DAS shall also pay to Southern all reasonable out-of-pocket
expenses actually incurred by Southern in the course of collecting amounts past
due under this section, including reasonable attorneys' fees, whether or not
any suit was commenced by Southern against DAS.

         SECTION 3.3 RUNNING ROYALTY REPORTS. With each quarterly Running
Royalty payment due to Southern under Section 3.1, DAS shall deliver to
Southern a true and accurate report, giving such particulars of the business
conducted by DAS, its Affiliates and Sublicensees, if any, during such calendar
quarter as are pertinent to account for Running Royalties due under Section 3.1
of this Agreement. Such report shall include at least (i) the total of Net
Sales during such quarter, (ii) the calculation of Running Royalties, and (iii)
the total Running Royalties so calculated and due Southern. If no royalties are
due, DAS shall so report. Southern shall not provide to third parties any
information contained in reports provided by DAS under this Section 3.3.

         SECTION 3.4 BOOKS AND RECORDS. DAS shall keep and maintain complete
and accurate accounting records containing such information as is reasonably
necessary to enable verification of the Running Royalties accrued and payable
to Southern by DAS under the terms of this Agreement. Upon the written request
of Southern and not more than once in each calendar year, DAS shall permit an
independent, certified public accounting firm of nationally recognized standing
selected by Southern and reasonably acceptable to DAS, at Southern's expense,
to have access during normal business hours to those records of DAS as may be
reasonably necessary to verify the accuracy of the royalty reports hereunder
for any year ending not more than [* * *] of such request. The accounting firm
shall disclose to DAS and Southern the extent of any discrepancies and the
basis for such determination. An adjusting payment shall be made upon
demonstration of any underpayment. Such payment shall be made in accordance
with the provisions of Section 3.2 of this Agreement.

         SECTION 3.5 EXPENSE OF AUDITS. The fees and expenses of the accounting
firm associated with Southern's request for an audit pursuant to Section 3.4
shall be borne by Southern; provided, however, that if any audit shall
correctly show that DAS underpaid the Running Royalties due to Southern under
this Agreement for the period being audited by more [* * *] that was payable
for such period, then DAS shall, in addition to paying Southern any such
deficiency, reimburse Southern for the out-of-pocket costs of such audit.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       5

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SECTION 4.        DUE DILIGENCE IN COMMERCIALIZATION.

                  4.1 OBLIGATION TO EXPLOIT. DAS shall use commercially
reasonable efforts to bring Control Release Naltrexone to market and to meet
the market demand therefor.

                  4.2 COMMERCIALIZATION MILESTONE. Southern shall have the
option to terminate this Agreement in the event that DAS is unable to file a
new drug application for a Controlled Release Naltrexone formulation with the
United States Food and Drug Administration by the fifth anniversary of the
Effective Date, unless a Force Majeure occurs during such period, in which case
the period of time to file such application shall be extended for a reasonable
period of time to be mutually agreed upon by the parties.

SECTION 5.        PRODUCT DEVELOPMENT AND MARKETING.

         SECTION 5.1 CLINICAL TRIALS. DAS shall be responsible for preparation
and prosecution of any regulatory filings required in order to conduct clinical
trials on Controlled Release Naltrexone. DAS shall be the owner of record for
all such regulatory filings.

         SECTION 5.2 MARKETING OF CONTROLLED RELEASE NALTREXONE. DAS shall be
responsible for the preparation and prosecution of suitable applications and
submissions for marketing approval of Controlled Release Naltrexone and shall
be the owner and party of record of all such applications and regulatory
filings.

         SECTION 5.3 COOPERATION AND ASSISTANCE BY SOUTHERN. Southern will,
subject to payment by DAS of its reasonable expenses, exercise commercially
reasonable efforts to assist DAS in obtaining the regulatory licenses and
approvals referred to in Sections 5.1 and 5.2 of this Agreement, and will
provide and execute all documents DAS may reasonably request for any of the
foregoing purposes. Southern hereby irrevocably designates and appoints DAS and
its duly authorized officers and agents, with full power of substitution, as
Southern's agents and attorneys-in-fact to act for and in Southern's behalf and
instead of Southern, to execute and file any such document and to do all other
lawfully permitted acts to further the purposes of the foregoing with the same
legal force and effect as if executed by Southern.

SECTION 6.      NALTREXONE PATENT PROTECTION.

         SECTION 6.1 PATENT PROSECUTION. DAS will be responsible for the
filing, prosecution and maintenance of the Naltrexone Patent. Preparation,
filing, prosecution, and maintenance of the Naltrexone Patent shall be solely
at DAS' expense. DAS shall provide Southern with a reasonable period of time to
review patent applications prepared by DAS for the Naltrexone Patent.

         SECTION 6.2 TERMINATION OF PROSECUTION. DAS' obligation to underwrite
and pay patent costs pursuant to this Section 6 shall continue for the Term of
this Agreement; provided, however, that DAS may terminate its obligations with
respect to any given patent application or patent upon three (3) months written
notice to Southern. Southern may then continue prosecution and/or maintenance
of such application(s) or patent(s) at its sole discretion and expense. In the
event that Southern decides to continue prosecution and/or maintenance of any
such application or patent, DAS shall have no further rights to any invention
claimed therein.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       6

<PAGE>

SECTION 7.    ENFORCEMENT OF THE NALTREXONE PATENT

         SECTION 7.1  INFRINGEMENT ACTIONS. DAS will have the right to enforce
the Naltrexone Patent against third-party infringement. Any such infringement
action initiated by DAS shall be prosecuted in its own name and at its own
expense. Southern shall cooperate fully with DAS in connection with any such
action. Southern agrees to notify DAS promptly of any infringement of the
Naltrexone Patent of which Southern is or becomes aware.

         SECTION 7.2  ASSIGNMENT OF PATENT RIGHTS. If DAS elects to commence an
action pursuant to the authority granted it in Section 7.1 above, Southern shall
have the right, without an obligation by DAS to pay any consideration other than
as expressly required by this Agreement, to assign to DAS all of Southern's
rights, title and interest in the Naltrexone Patent. In the event that Southern
makes such an assignment, such assignment shall be irrevocable and shall allow
DAS to proceed on any such action without Southern as a party. If Southern
assigns the Naltrexone Patent to DAS pursuant to this Section 7.2, such
assignment shall require DAS to continue to meet DAS' obligations under this
Agreement as if the assigned patent were still licensed to DAS. In the event
that the Naltrexone Patent is not assigned to DAS and DAS commences an
infringement action, Southern shall cooperate fully with DAS in connection with
any such action, which may include, at the reasonable discretion of DAS, being
named as a party and participating in such action at DAS' expense.

         SECTION 7.3  DISTRIBUTION OF PROCEEDS. Any recoveries or reimbursements
from any infringement action brought by DAS pursuant to Section 7.1 shall first
be applied to reimburse DAS and Southern for all reasonable out-of-pocket
litigation expenses actually incurred by DAS and Southern in the course of
participating in such action. Any funds remaining after reimbursement of DAS and
Southern for such expenses shall be treated as Net Sales of Controlled Release
Naltrexone for purposes of Sections 1.11 and 3.1 of this Agreement.

         SECTION 7.4  ALTERNATIVE ENFORCEMENT. In the event that DAS elects in
writing not to exercise its right to prosecute any infringement of the
Naltrexone Patent, Southern may elect to prosecute such infringement at its own
expense, controlling such action and retaining all recoveries therefrom.

SECTION 8.    INFRINGEMENT OF THIRD PARTY RIGHTS.

         SECTION 8.1  NOTICE. If the development, manufacture, use or sale of
Controlled Release Naltrexone results in a claim of patent infringement or trade
secret misappropriation, the party to this Agreement first having notice shall
promptly notify the other party in writing. The notice shall set forth the facts
of the claim in reasonable detail.

         SECTION 8.2  DEFENSE BY DAS. DAS shall defend against any such third
party claim which is based on the development, manufacture, use or sale of
Controlled Release Naltrexone. Southern shall cooperate with DAS in such defense
and shall tender to DAS the authority to control and/or settle such claim, but
Southern shall have the right to be represented by counsel of its own choice and
at its own expense. If DAS is required by a final court order to make a payment
including Running Royalty payments on Net Sales of Controlled Release Naltrexone
by

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       7
<PAGE>

DAS to a third party in connection with the disposition of such claim, DAS
shall be responsible for such payments.

         SECTION 8.3  DEFENSE BY SOUTHERN. Southern shall defend against any
such third party claim which is based on DAS' use of the Southern Patent
Rights or Southern Know-How to commercialize Control Release Naltrexone. DAS
shall cooperate with Southern in such defense and shall tender to Southern
the authority to control and/or settle such claim, but DAS shall have the
right to be represented by counsel of its own choice and at its own expense.
If Southern is required by a final court order to make a payment including
Running Royalty payments on Net Sales of Controlled Release Naltrexone by DAS
to a third party in connection with the disposition of such claim, Southern
shall be responsible for such payments.

SECTION 9.    REPRESENTATIONS AND WARRANTIES OF SOUTHERN. This Agreement is
made with Southern in reliance upon Southern's representations and warranties to
DAS, which by Southern's execution of this Agreement, Southern hereby confirms
as follows:

         SECTION 9.1       INTELLECTUAL PROPERTY.   Southern:

         (i) is the sole owner of all rights, title and interest in the
Naltrexone Patent and the Southern Patent Rights and Southern Know-How;

         (ii) has not assigned, transferred, licensed, pledged or otherwise
encumbered the Naltrexone Patent;

         (iii) has full power and authority to enter into this Agreement and to
grant the licenses set forth in Section 2 of this Agreement; and

         (iv) except as previously disclosed to DAS in writing, is not aware of
any questions or challenges with respect to the validity of any claims of the
Naltrexone Patent and the Southern Patents.

         SECTION 9.2       AUTHORITY; NO CONFLICT.

                  (a) This Agreement constitutes the legal, valid, and binding
obligation of Southern, enforceable against Southern in accordance with its
terms. Southern has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform its obligations
under this Agreement.

                  (b) The execution and delivery of this Agreement will not
directly or indirectly (with or without notice or lapse of time):

                           (i)      contravene, conflict with, or result in a
                                    violation of (A) any provision of the
                                    organizational documents of Southern, or (B)
                                    any resolution adopted by the board of
                                    directors of Southern; or

                           (ii)     contravene, conflict with, or result in a
                                    violation or breach of any provision of, or
                                    give any person the right to declare a
                                    default or exercise any remedy under, or to
                                    accelerate the maturity or

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       8

<PAGE>
                                    performance of, or to cancel, terminate, or
                                    modify, any material agreement to which
                                    Southern is bound.

Southern is not and or will not be required to give any notice to or obtain any
consent from any person in connection with the execution and delivery of this
Agreement.

SECTION 10.    NEGATION OF WARRANTIES BY SOUTHERN. Except as specifically set
forth in Section 9 of this Agreement, Southern hereby specifically disclaims all
other warranties, either express or implied, with respect to Controlled Release
Naltrexone, including, without limitation, warranties of merchantability and
fitness for a particular purpose.

SECTION 11.    REPRESENTATIONS AND WARRANTIES OF DAS. DAS represents and
warranties to Southern as follows:

         SECTION 11.1      ORGANIZATION AND GOOD STANDING.

         DAS is a corporation duly organized, validly existing, and in good
standing under the laws of the State of California, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under this Agreement.

         SECTION 11.2      AUTHORITY; NO CONFLICT.

                  (a) This Agreement constitutes the legal, valid, and binding
obligation of DAS, enforceable against DAS in accordance with its terms. DAS has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and to perform its obligations under this Agreement.

                  (b) The execution and delivery of this Agreement will not
directly or indirectly (with or without notice or lapse of time):

                           (i)      contravene, conflict with, or result in a
                                    violation of (A) any provision of the
                                    organizational documents of DAS, or (B) any
                                    resolution adopted by the board of directors
                                    or the stockholders of DAS; or

                           (ii)     contravene, conflict with, or result in a
                                    violation or breach of any provision of, or
                                    give any person the right to declare a
                                    default or exercise any remedy under, or to
                                    accelerate the maturity or performance of,
                                    or to cancel, terminate, or modify, any
                                    material agreement to which DAS is bound.

DAS is not and or will not be required to give any notice to or obtain any
consent from any person in connection with the execution and delivery of this
Agreement.

SECTION 12.    LIMITATION OF LIABILITY. DAS hereby agrees to release, waive,
and forever discharge any demands, claims, suits, or actions of any character
against Southern arising out of or in connection with DAS' commercialization of
Controlled Release Naltrexone in the absence

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       9

<PAGE>

of any negligent or willful act or omission by Southern in the fulfillment of
its obligations under this Agreement.

         In no event shall either party be responsible or liable with respect to
any subject matter of this Agreement under contract, tort, strict liability or
other legal theory, for any special, indirect, incidental, or consequential
damages such as, but not limited to, loss of product, profits or revenues,
damage or loss from operation or non-operation of plant, or claims of customers.

SECTION 13.    INDEMNITY. Subject to the terms of this paragraph, DAS hereby
agrees to indemnify, hold harmless, and defend Southern and its officers,
directors, representatives, agents, and employees from and against any and all
demands, claims, suits, or actions of any character (a "claim") presented or
brought on account of any injuries, losses, or damages sustained by any person
or property in consequence of any negligent act or omission of DAS or its
agents, employees, or subcontractors relating to Controlled Release Naltrexone,
except for any injuries, losses, or damages that specifically result from the
negligence or willful misconduct of Southern, in the performance of the
obligations imposed herein. DAS' obligations hereunder are subject to Southern
(i) cooperating with DAS in such defense at DAS' expense, (ii) tendering to DAS
the authority to control and/or settle such claim (but Southern shall have the
right to by represented by counsel of its own choice and at its own expense),
and (iii) notifying DAS in writing within 15 days of first becoming aware of any
such claim, unless DAS is not prejudiced by later notification. The foregoing
indemnity shall include but not be limited to court costs, attorneys' fees,
costs of investigation, costs of defense associated with such demands, claims,
suits, or actions. DAS will include [* * *].

         During the time that Controlled Release Naltrexone is introduced
into human trials or is being commercially distributed or sold by DAS or by a
Sub-licensee, Affiliate or agent of DAS, DAS shall make a good faith effort,
at no cost to Southern, to procure and maintain [* * *]insurance in
reasonable amount in relation to the nature of Controlled Release Naltrexone,
to the extent that such insurance is available to DAS at a cost reasonably
related to the anticipated risks and commensurate with DAS' reasonable
assessment of the risk and its ability to respond to damages. Any such [* * *]
insurance shall provide (i) [* * *] (ii) [* * *]. The amounts provided for by
such insurance [* * *].

         DAS shall provide Southern with written evidence of such insurance or
evidence of DAS' attempts to obtain such insurance upon written request of
Southern and shall give Southern at least thirty (30) days notice prior to
cancellation, non-renewal or material change relating to insurance of which DAS
has previously notified Southern.

SECTION 14.    CONFIDENTIALITY.

         SECTION 14.1  CONFIDENTIALITY OBLIGATION. During the Term of this
Agreement and for a period of five years thereafter, DAS and Southern shall
maintain in confidence all Confidential Information disclosed to it by the other
party. Neither DAS nor Southern will use, disclose or grant the use of such
Confidential Information except as expressly authorized by this Agreement. To
the extent that disclosure is authorized by this Agreement, the disclosing party
will obtain prior agreement from the party to whom disclosure is to be made, to
hold in confidence and not

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       10

<PAGE>

make use of such information for any purposes other than those permitted by
this Agreement. Each party will use at least the same standard of care as it
uses to protect its own proprietary and trade secret information to insure
that such employees, agents, consultants and investigators do not disclose or
make any unauthorized use of such Confidential Information. Each party will
promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

         SECTION 14.2  EXCEPTIONS. The obligations of confidentiality contained
in Section 14.1 will not apply to the extent that it can be established by the
receiving party by competent proof that such Confidential Information:

                  (a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure by the other party;

                  (b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure by the other party;

                  (c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or

                  (d) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third-party lawfully in possession of the
information.

         SECTION 14.3  AUTHORIZED DISCLOSURE. Each party may disclose the
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental laws or regulations, or
reasonably required by investors, potential vendors and potential sources of
financing, provided that if such party is required to make any such disclosure
of the Confidential Information it will to the extent commercially practicable
give reasonable advance notice to the other party of such disclosure requirement
and, except to the extent inappropriate in the case of patent applications, will
use all diligent efforts to secure confidential treatment of such information
required to be disclosed to government authorities or by court order.

SECTION 15.    TERMINATION.

         SECTION 15.1      TERMINATION BY SOUTHERN.   If DAS:

                  (a) Commits a breach of any of the material provisions of this
Agreement which is not cured by DAS within ninety (90) days of the date on which
Southern provides written notice to DAS of such breach; or

                  (b) Commences or has commenced against it any proceeding under
the Federal Bankruptcy Code, or any state law concerning creditor relief,
assignment for benefit of creditors, or appointment of a receiver, which
proceeding is not dismissed within 90 days of the date of commencement,

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       11

<PAGE>

then Southern, to the extent permitted by law, shall have the right, at
Southern's sole election, to declare the exclusive licenses granted to DAS in
Section 2 of this Agreement terminated or to convert such licenses to
non-exclusive, such termination or conversion to be effective immediately upon
such declaration by Southern.

         SECTION 15.2  TERMINATION BY DAS. DAS shall have the right to
terminate this Agreement upon ninety (90) days written notice to Southern.

         SECTION 15.3  CONSEQUENCES OF TERMINATION. If termination of this
Agreement occurs, all rights licensed to DAS hereunder shall revert to
Southern and neither party shall have any obligations to the other party,
except for accrued obligations to pay earned Running Royalties and other
obligations hereof that expressly by their terms survive termination;
provided, however, that in no event will DAS or any sublicensee, transferee
or assignee be precluded from disposing of its inventory or meeting its then
existing supply obligations. Notwithstanding anything to the contrary, the
following Sections shall survive termination: 8 - 14 and 16.

SECTION 16     GENERAL PROVISIONS.

         SECTION 16.1  GOVERNING LAW. This Agreement shall be governed by the
internal laws of the State of Alabama.

         SECTION 16.2  ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together
with the Research Agreement represent the entire agreement between the parties
with respect to the subject matter hereof. This Agreement may only be modified
or amended in writing signed by both parties. In the event of a conflict with
respect to the licenses granted in this Agreement, the terms of this Agreement
shall prevail over the Research Agreement.

         SECTION 16.3  NOTICES. Notices, payments, statements, reports and other
communications under this Agreement shall be in writing and shall be effective
on receipt if addressed as follows:

                  If for Southern:

                           Southern Research Institute
                           200 Ninth Avenue South
                           Birmingham, Alabama 35205
                           Athn: David W. Mason
                           Telephone: (205) 581-2389
                           Facsimile: (205) 581-2618

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       12

<PAGE>

                  If for DAS:

                           Drug Abuse Sciences, Inc.
                           1430 O'Brien Drive, Suite E
                           Menlo Park, California 94025
                           Attn: Chief Executive Officer
                           Telephone: 650-426-1000
                           Fax: 650-462-1003

Either party may change its official address upon written notice to the other
party.

         SECTION 16.4  NO WAIVER. Either party's failure to enforce any
provision or provisions of this Agreement shall not in any way be construed
as a waiver of any such provision or provisions, nor prevent that party
thereafter from enforcing each and every other provision of this Agreement.
The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.

         SECTION 16.5  ASSIGNMENT. This Agreement may not be assigned or
otherwise transferred, nor, except as expressly provided hereunder, may any
right or obligation hereunder be assigned or transferred, by DAS without the
written consent of Southern; provided, however, that DAS may, without such
consent, assign this Agreement and its rights and obligations hereunder (a) in
connection with the transfer or sale of all or substantially all of DAS'
business, if such assets include substantially all of the assets relating to
DAS' performance of its obligations hereunder, (b) to a wholly-owned subsidiary
of DAS or one of its Affiliates or, (c) in the event of DAS' merger or
consolidation with another company at any time during the term of this
Agreement. Any purported assignment in violation of this Section 16.5 shall be
void. Any permitted assignee shall assume all obligations of its assignor under
this Agreement.

         SECTION 16.6  TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

         SECTION 16.7  COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which together shall be deemed an original, but all
of which together shall constitute one and the same instrument.

         SECTION 16.8  DISPUTE RESOLUTION. If a dispute arises between the
parties relating to the interpretation or performance of this Agreement, the
parties agree to hold a meeting, attended by individuals with decision-making
authority regarding the dispute, to attempt in good faith to negotiate a
resolution of the dispute prior to pursuing other available remedies. If, within
30 days after such meeting, unless extended by mutual consent, the parties have
not succeeded in negotiating a resolution of the dispute, the parties agree to
hold another meeting, attended by individuals holding at least vice presidential
offices within their respective organizations, to again attempt in good faith to
negotiate a resolution of the dispute. If, within 30 days after such meeting,
unless extended by mutual consent, the parties have not succeeded in negotiating
a resolution of the dispute, such dispute shall be submitted to final and
binding arbitration under

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       13

<PAGE>

the then current Licensing Agreement Arbitration Rules of the American
Arbitration Association ("AAA"), with a panel of three arbitrators in New
York, New York. Such arbitrators shall be selected by mutual agreement of the
parties or, failing such agreement, shall be selected according to the
aforesaid AAA rules. The parties shall bear the costs of arbitration equally
unless the arbitrators, pursuant to their right, but not their obligation,
require the non-prevailing party to bear all or any unequal portion of the
prevailing party's costs. The decision of the arbitrators shall be final and
may be sued on or enforced by the party in whose favor it runs in any court
of competent jurisdiction at the option of the successful party. The
arbitrators will be instructed to prepare and deliver a written, reasoned
opinion conferring their decision. The rights and obligations of the parties
to arbitrate any dispute relating to the interpretation or performance of
this Agreement or the grounds for the termination thereof shall survive the
expiration or termination of this Agreement for any reason.

         SECTION 16.9  FURTHER ASSURANCES. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute and
deliver to each other such other documents, and (c) to do such other acts and
things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement.

         SECTION 16.10  SEVERABILITY. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.

         SECTION 16.11 PUBLICITY. Except as required by law and in connection
with obtaining company financing, nothing contained in this Agreement shall be
construed as conferring any right to use in advertising, publicity, or other
promotional activities any name, trade name, trademark, or other designation of
Southern (including contraction, abbreviation or simulation of any of the
foregoing) without prior written approval.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       14

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above stated.

SOUTHERN RESEARCH INSTITUTE               DRUG ABUSE SCIENCES, INC.

By:     /s/ David W. Mason                By:    /s/ Stanley A. Kaplan
    --------------------------------          -------------------------------
        David Mason                              Stanley A. Kaplan
        Its: Assistant Secretary                 Its: Chief Executive Officer

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       15

<PAGE>

                                    EXHIBIT A

                             SOUTHERN PATENT RIGHTS



------------------------------- -------------- ---------------- ---------------- ---------------- --------------------
           COUNTRY                SERIAL            FILING          PATENT            PATENT          DUE DATES/
                                    NO.              DATE             NO.              DATE            STATUS
------------------------------- -------------- ---------------- ---------------- ---------------- --------------------
                                                 U.S. APPLICATIONS
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
                                                                                  
U.S.A.                          08/062,696       5/17/93        5,407,609        4/18/95          Issued; Current
                                                                                 (expires
                                                                                 4/18/12)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
PCT (designating Austria,       PCT/US           5/2/90                -                -         Published
Australia, Barbados,            9010/2439                                                         11/15/90;
Bulgaria, Brazil, Canada,                                                                         Inactive.
Switzerland, Liechtenstein,
Germany, Denmark, Spain,
Finland, U.K., Hungary,
Japan, North Korea, South
Korea, SRI Lanka, Luxembourg,
Monaco, Madagascar, Malawi,
Netherlands, Norway, Romania,
Sudan, Sweden, Russian
Federation, EP; OAPI)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Austria                         9008830.4        5/02/90        0471036          01/17/96         Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Belgium                         90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/2/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Canada                          2,050,911         5/02/90       2,050,911         7/15/97         Issued; Current.
(Nat'l Phase of PCT)                             (9/30/91-Nat'l                  (expires
                                                 Phase)                          5/22/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Switzerland                     90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/2/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Germany                         909088304        5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/2/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
EP                90908830.4     5/02/90                                                          Granted -
(Nat'l Phade of PCT)             (9/25/91-EP                                                      National Phase
                                 Nat'l Phase)                                                     applications filed
                                                                                                  in Austria,
                                                                                                  Belgium,
                                                                                                  Switzerland,
                                                                                                  Germany, Denmark,
                                                                                                  Spain, France, United
                                                                                                  Kingdom, Italy,
                                                                                                  Leichtenstein,
                                                                                                  Luxembourg,
                                                                                                  Netherlands and
                                                                                                  Sweden.
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       16
<PAGE>

------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Spain                           90908830.4       5/02/90        4071036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Finland                         915129            5/2/90                                          Revised claims
(Nat'l Phase of PCT)                              (10/30/91-                                      filed 3/29/92.
                                                  Nat'l Phase)                                    Office Action
                                                                                                  received.
                                                                                                  Response to office
                                                                                                  action filed
                                                                                                  5/23/96.
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
France                          90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Great Britain                   90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Italy                           90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Japan                           508473/90        5/02/90        2582116          11/21/96         Issued; Current.
(Nat'l Phase of PCT)                             (11/15/91-                      (expires
                                                 Nat'l Phase)                    5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
South Korea                     91-701573        5/02/90        162669           9/01/98          Issued; Current.
(Nat'l Phase of PCT)                             (10/31/91-                      (expires
                                                 Nat'l Phase)                    0/01/13)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Luxembourg                      90908830.4       5/02/90        0471016          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Hong Kong                       90908830.4       5/03/90        0,471,836        1/17/96          Issued; Current.
                                (EP)                            (HK          #
                                                                308/1997)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Singapore                       90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                (EP) 0471036                    (EP)             (expires
                                (SG)                            97909105         5/02/10)
                                                                (SG)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Netherlands                     90908810.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Norway                          91.4292          5/2/90         302.683          4/14/98          Issued; Current.
(Nat'l Phase of PCT)                             (11/1/91-                       (expires
                                                 Nat'l Phase)                    5/02/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Sweden                          90908830.4       5/02/90        0471036          1/17/96          Issued; Current.
                                                                                 (expires
                                                                                 5/02/10)
----------------------------------------------------------------------------------------------------------------------
                         NON-PCT CONVENTION APPLICATIONS
----------------------------------------------------------------------------------------------------------------------
China                           90194260.9       5/04/90               -                -         Application
                                                                                                  withdrawn 11/91
                                                                                                  per instructions
                                                                                                  from SRI.
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Greece                          90.01.00330      5/03/90        1000614          3/04/92          Issued; Current.
                                                                                 (expires
                                                                                 5/03/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Ireland                         1616/90          5/03/90        09313            8/12/96          Issued; Current.

[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       17

<PAGE>

                                                                                 (expires
                                                                                 5/03/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Israel                          347476           5/04/90        94296            2/01/96          Issued; Current.
                                                                                 (expires
                                                                                 5/04/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
New Zealand                     233570           5/04/90        233570           5/04/90          Issued; Current.
                                                                                 (expires
                                                                                 5/04/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
South Africa                    90/3411          5/04/90        90/3411          2/27/91          Issued; Current.
                                                                                 (expires
                                                                                 5/04/10)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
India                           341/MAS/ 90      5/04/90        173577           1/06/95          Inactive.
                                                                                 (expires
                                                                                 5/04/97)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------
Taiwan                          79103694         5/07/90        50062            7/11/91          Issued; Current.
                                                                                 (expires
                                                                                 7/11/06)
------------------------------- ---------------- -------------- ---------------- ---------------- --------------------


[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                                       18


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